When auditing Checkersrallys' consolidated financial statements, what must the auditor identify and assess?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with US GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.
- Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys' 2025 Franchise Disclosure Document, when performing an audit in accordance with US GAAS (Generally Accepted Auditing Standards), the auditor must identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. This assessment is a critical step in the audit process. The auditor then designs and performs audit procedures that are responsive to those identified risks.
These procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. This means the auditors will review a sample of Checkersrallys' financial data and records to ensure accuracy and compliance with accounting standards. The auditor also obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate for the circumstances. However, the audit does not express an opinion on the effectiveness of Checkersrallys' internal control.
Furthermore, the auditor evaluates the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluates the overall presentation of the consolidated financial statements. Finally, the auditor must conclude whether there are conditions or events that raise substantial doubt about Checkersrallys' ability to continue as a going concern for a reasonable period of time. This comprehensive approach ensures that the financial statements provide a fair and accurate representation of Checkersrallys' financial position and performance.
For a prospective Checkersrallys franchisee, this rigorous audit process provides assurance that the financial information presented by the franchisor is reliable and has been thoroughly reviewed by an independent auditor. This can help the franchisee make informed decisions about their investment. Franchisees should note that while the audit provides a high level of assurance, it is not a guarantee against all misstatements, especially those resulting from fraud.